AP: President Mahmoud Ahmadinejad swept to power promising to bring oil revenues to every family but he now faces growing domestic discontent over newly imposed fuel rationing and skyrocketing prices. Associated Press
By ALI AKBAR DAREINI
Associated Press Writer
TEHRAN, Iran (AP) – President Mahmoud Ahmadinejad swept to power promising to bring oil revenues to every family but he now faces growing domestic discontent over newly imposed fuel rationing and skyrocketing prices.
The anger at home is an unwelcome challenge for a president who already has his hands full fending off international criticism over Iran’s nuclear program.
But analysts said the fuel rationing imposed this week may be an attempt by Iran to reduce its dependence on foreign oil imports that other governments could eventually use to pressure Tehran to halt its nuclear program.
A month after raising gasoline prices by 25 percent, the government began fuel rationing Wednesday that sparked violence in Tehran. Angry Iranians smashed shop windows and set fire to a dozen gas stations.
With armed guards protecting gas stations Thursday, the capital calmed and motorists lined up to fill their tanks. But many were still seething.
“Ahmadinejad promised paradise but his government has made life hell for Iranians,” said angry driver Mohsen Nosrati, waiting at a gas station in central Tehran.
Iran’s president portrayed himself as a champion of the poor when he swept to power in 2005, promising to use the country’s oil wealth to eradicate poverty and tackle unemployment.
But unemployment is still high while inflation surges. Although the government estimates the unemployment rate at 10 percent, economists say it could be as high as 30 percent.
Even before the rationing, the hard-line president was the target of growing criticism – even from conservatives who once supported him – for dramatically raising housing and food prices in the past year. Prices for fruits and vegetables have tripled in the past six months and housing prices have more than doubled since last summer.
Many fear the boost in fuel costs will heat up already high inflation, which is reported running at nearly 14 percent annually by Iran’s Central Bank but estimated at around 25 percent by economists.
Conservatives in Iran’s parliament, especially those aligned with the national oil company, have long pushed for higher gasoline prices. Still, Ahmadinejad resisted the idea because of his campaign promise to share Iran’s oil wealth with the poor.
Earlier this month, some 60 economists wrote to Ahmadinejad blaming rising prices on his mismanagement and flawed economic policies.
“Ahmadinejad promised to improve our living conditions, but he has brought us misery and poverty,” said Iranian analyst Hamid Reza Shokouhi.
Many experts blame the worsening economy on two sets of U.N. sanctions imposed on Iran since December over Tehran’s refusal to halt uranium enrichment.
On Friday, diplomats said the U.S. and its allies were awaiting an Iranian response to a proposal that would commit the U.N. Security Council to hold off on new sanctions if Tehran stops further development of its uranium enrichment program.
Iran says it is developing its nuclear program to generate electricity and reduce its petroleum reliance. But the United States and its allies accuse it of seeking to develop nuclear weapons, a charge Tehran denies.
These dynamics made for a difficult environment to tackle one of the country’s most significant economic problems – gasoline subsidies that cost the government billions of dollars per year and encourage unnaturally high demand.
Iran is one of the world’s biggest oil producers, but it does not have enough refineries, so it must import more than 50 percent of the gasoline its people use. The rationing is part of a government attempt to reduce the $10 billion it spends each year to import fuel that is then sold to Iranian drivers at less than cost to keep prices low.
The government tried to curb demand and related subsidy expenditures by raising the price of gasoline by 25 percent in May, but the increase was not enough to significantly curb consumption.
Iranians are accustomed to gasoline at rock bottom prices. After the May price hike, gas sells at the equivalent of 38 cents a gallon.
The rationing system allows private drivers only 26 gallons of fuel per month at the subsidized price. Taxis get 211 gallons a month. Anything more than that will have to be bought at a higher price, which officials say will be announced within the next two months.
The fuel rationing has triggered widespread discontent in Iran, but if it succeeds in reducing gasoline imports, it could help insulate the country from international pressure related to its nuclear program.
“We will greatly suffer if they (foreign countries) suddenly decide not to sell us fuel,” said Iranian political analyst Saeed Leylaz. “Fuel rationing is a security-economic decision to reduce fuel consumption.”
Seeking to pressure Iran, leaders of a bipartisan panel in the U.S. House of Representatives proposed legislation Thursday designed to reduce Iran’s access to imported gasoline. Under the proposal, any company that provided Iran with gasoline or helped it import gasoline after the end of the year could lose its access to American customers through sanctions.